Tara Deschamps, The Canadian Press
Published Thursday, February 10, 2022 at 10:43 AM EST
Last Updated Thursday, February 10, 20,22 at 11:40 AM EST
TORONTO — RioCan Real Estate Investment Trust will be reducing its tenant mix to ensure malls, and other retail spaces, it owns, are filled with resilient businesses that will weather any COVID-19 upheavals.
Jonathan Gitlin, chief executive, stated Thursday that Toronto-based commercial landlords will be closely scrutinizing who is renting their spaces. This will lead to the company having to sell some assets in enclosed malls. These are more difficult to adapt to today’s tenants’ needs.
On a conference call with analysts, he stated that there is a tenant mix within the properties we are keeping. This is necessary in order for us to remain relevant and to keep up with consumer trends.
We are moving to more necessity-based purveyors. It might not be tenants with extraordinary covenants, but they have some great uses that will help to…the flavor of our shopping centre.
Gitlin was not able to share information about which tenants might be put up for eviction, but has repeatedly highlighted that the trust regards grocery, pharmacy, liquor store tenants (which make up just shyly of 20% of the company’s rent) as resilient.
His comments come after Canadian retailers have spent nearly two years swinging between periods with intense lockdowns, and cautious reopenings to stop the spread of COVID-19.
Many retailers are forced to close their shops, rethink their brick and mortar strategies, or struggle to pay rent and other bills due to the constantly changing regulations.
Gitlin said that she is not going to minimize the challenges the commercial real-estate industry faced throughout the year.
2021 was volatile. Tenant shut downs lasted well into the summer. Additionally, there were many restrictions on retail sales throughout 2021. Omicron caused more disruption in the end.
However, that volatility has resulted in strength for many retailers. Gitlin said it has emphasized brick-and mortar shops rather than diminishing them like many expected when people began shopping online.
He said that Canadians are keen to control their shopping experience. Physical retail stores will still play an important part of their lives.
E-commerce is not a mutually exclusive relationship with physical retail. They have a good relationship. There is every indication that physical retail… plays a crucial role in this relationship.
These findings were confirmed Wednesday by the company reporting that its rent collection rate had reached 98.6 percent in its most recent quarter. This is a slight increase from 96.2 percent last year.
The company’s fourth quarter commitment occupancy level for its portfolio of 207 properties was 96.7 percent, an increase of 95.7 percentage.
The net income for Dec. 31 was $208.8 million, an increase of $65.6 million from the fourth quarter 2020.
The results drove the trust’s stock up 58cs, or almost three percent, to $23.25 in mid morning trading.
The company provided updates on Well, a highly-anticipated commercial property and office building it is building in Toronto, along with earnings.
The site is expected to house several tenants including Shopify Inc.; the trust now states that construction of commercial parts of the property has been completed at 82%.
Nearly 90% of the office space and 50% of the retail space are leased. Spring 2023 is the anticipated opening date of the retail component.
This report was published by The Canadian Press in February 20, 2022.
Companies in this story (TSX.REI and TSX.SHOP).
